RPSM11100080 - Technical Pages: Lifetime allowance: Basic principles: What makes this all work in practice

What makes this all work in practice: responsibilities and reporting requirements

[s217][s254][ The Registered Pension Schemes (Provision of Information) Regulations 2006 SI 2006 No. 567][ The Registered Pension Schemes (Accounting and Assessment) Regulations 2005 SI 2005 No. 3454][ The Registered Pension Schemes (Enhanced Lifetime Allowance) Regulations 2006 SI 2006 No. 131]

Whilst the member is alive (or where the payment relates to the member’s lifetime benefits see RPSM09108030and RPSM09108050), the process of establishing how much of that individual’s lifetime allowance has been used up at a BCE, and whether or not a chargeable amount has arisen, is guided by two factors

• the scheme administrator is jointly and severally liable (with the member) for any lifetime allowance charge that arises at a BCE on any chargeable amount that crystallises, and is required to account for that due charge with HMRC, and
• certain reporting requirements are imposed on both the scheme administrator and the member - these reporting requirements cover not only circumstances where the scheme administrator or member must make a report to HMRC, but also circumstances where they must provide information to each other.

The scheme administrator has three basic responsibilities before, at and after a BCE occurs in the member’s lifetime

• establishing whether a chargeable amount arises at the BCE,
• accounting to HMRC for the lifetime allowance charge due on any chargeable amount that arises at the BCE (on a quarterly basis), and
• providing the member after the BCE with a statement confirming the total level of the member’s lifetime allowance that has been used up under the scheme, and if a chargeable amount arose at the BCE, a notice confirming
• the level of chargeable amount that arose at the BCE,
• the lifetime allowance charge due, and
• whether or not they have accounted for the due charge, or intend to do so in due course.

How a scheme administrator establishes whether a member has enough available lifetime allowance to cover the amount crystallising at a BCE is not prescribed by legislation. It is for schemes to establish the best way for them to do this, based on their own particular circumstances and administrative systems. It is also for them to establish the level of advance planning needed before a BCE, and the timescales they give to their members to respond to any requests for information they make. It may be that a scheme administrator is content in certain circumstances to rely on a simple member declaration. But in other circumstances the scheme administrator may feel a more detailed questionnaire is necessary, with evidence requested.

The responsibilities and processes are covered in more detail from RPSM11103000 onwards.

The example on RPSM11100090 shows how a scheme administrator might go about dealing with the above issues. This example is purely for illustrative purposes - it is not meant to represent a prescriptive process that scheme administrators must follow (except for the need to provide the member with a post-BCE statement, which is a statutory requirement).

The principles described above apply also when, in certain circumstances, a BCE occurs after the member’s death in respect of benefits paid after the member’s death (that, ordinarily, would have been paid to the member before death) because entitlement to those benefits could not be established before death (see RPSM09108030and RPSM09108050).

Where the BCE is triggered because a ‘relevant lump sum death benefit’ is paid following the death of a member the liability for any lifetime allowance charge falls solely on the recipient of that payment. The member’s personal representatives, not the scheme administrator, have responsibility for establishing whether or not any lifetime allowance charge is due (after the payments have been made). The position here is explained in detail from RPSM11103600 onwards.